Home Buying Toolkit
Estimate affordability, compare financing, and see how extra payments change the long-term cost of ownership.
🏠 House Affordability Calculator
Determine how much house you can afford based on your income
💰 Your Financial Information
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Based on 28% front-end ratio
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Monthly Payment (PITI)
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Debt-to-Income Ratio
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Down Payment %
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Monthly Payment Breakdown
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📚 Understanding Home Affordability
The 28/36 Rule
The 28/36 rule is a widely-used guideline for determining how much you can afford to spend on housing:
- 28% Front-End Ratio: Your monthly housing costs (PITI: Principal, Interest, Taxes, Insurance) should not exceed 28% of your gross monthly income
- 36% Back-End Ratio: Your total monthly debt payments (including housing) should not exceed 36% of your gross monthly income
What is PITI?
- P - Principal: The amount you're borrowing to buy the home
- I - Interest: The cost of borrowing money from the lender
- T - Taxes: Property taxes paid to local government
- I - Insurance: Homeowners insurance (and PMI if down payment is less than 20%)
Down Payment Guidelines
- 20% or more: Avoids PMI (Private Mortgage Insurance), better rates, lower monthly payments
- 10-19% down: May require PMI, which adds to monthly costs
- Less than 10%: Often requires PMI and may have higher interest rates
- FHA loans: As low as 3.5% down payment, but requires mortgage insurance
- VA loans: 0% down for eligible veterans and service members
Additional Costs to Consider
- Closing costs: Typically 2-5% of home price (lender fees, title insurance, appraisal)
- Moving expenses: Movers, truck rental, packing supplies
- Home inspection: $300-$500 to identify potential issues
- Appraisal: $300-$600 required by lender
- Maintenance: Budget 1-2% of home value annually for repairs
- Utilities: Water, electric, gas, internet, trash (typically $200-400/month)
- Furniture & appliances: Budget for furnishing your new home
Factors That Affect Affordability
- Credit score: Higher scores get better interest rates (700+ is good, 760+ is excellent)
- Debt-to-income ratio: Lower DTI means you can afford more house
- Job stability: Lenders prefer 2+ years in same field
- Down payment amount: Larger down payment = smaller loan = lower monthly payment
- Interest rates: Even 0.5% difference significantly impacts affordability
- Location: Property taxes and insurance vary widely by state
Tips for First-Time Buyers
- Get pre-approved before house hunting to know your budget
- Don't max out your budget - leave room for unexpected expenses
- Save 3-6 months of expenses as emergency fund (separate from down payment)
- Consider total monthly costs, not just mortgage payment
- Research first-time buyer programs and grants in your area
- Factor in commute costs if home is far from work
- Think about resale value and future life changes
Frequently Asked Questions
What is the 28/36 rule and why is it important?
The 28/36 rule is a guideline used by lenders to determine how much you can afford. The 28% refers to your housing costs (PITI) as a percentage of gross monthly income, while 36% refers to your total debt payments. Staying within these limits helps ensure you can comfortably afford your home while maintaining financial stability.
How much should I save for a down payment?
While 20% is ideal to avoid PMI, many buyers put down less. FHA loans require as little as 3.5%, and conventional loans can go as low as 3%. However, larger down payments mean lower monthly payments and less interest paid over time. Save what you can while maintaining an emergency fund.
What is PMI and how can I avoid it?
Private Mortgage Insurance (PMI) is required when you put down less than 20% on a conventional loan. It typically costs 0.5-1% of the loan amount annually. You can avoid PMI by putting down 20% or more, using a VA loan (for eligible veterans), or choosing a piggyback loan structure. PMI can be removed once you reach 20% equity.
Should I get pre-qualified or pre-approved?
Pre-approval is much stronger than pre-qualification. Pre-qualification is a quick estimate based on self-reported information. Pre-approval involves a full credit check and income verification, giving you a conditional commitment from a lender. Sellers take pre-approved buyers more seriously, and it helps you understand your true budget.
How does my credit score affect how much I can afford?
Your credit score significantly impacts your interest rate. A higher score (760+) can save you tens of thousands over the life of the loan compared to a lower score (620-639). For example, on a $300,000 loan, a 1% interest rate difference equals about $60,000 in additional interest over 30 years. Improve your score before applying if possible.
What debts are included in the debt-to-income ratio?
DTI includes all recurring monthly debts: mortgage/rent, car loans, student loans, credit card minimum payments, personal loans, and child support/alimony. It does NOT include utilities, groceries, insurance (except mortgage insurance), or other living expenses. Lenders want to see a DTI below 43%, with 36% or lower being ideal.
Is it better to choose a 15-year or 30-year mortgage?
A 15-year mortgage has higher monthly payments but lower interest rates and you'll pay much less interest overall. A 30-year mortgage has lower monthly payments, giving you more flexibility, but you'll pay significantly more interest. Choose based on your budget, financial goals, and how long you plan to stay in the home. You can always pay extra on a 30-year to pay it off faster.
🧭 Guided Journeys
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